1.1)  Describe the shifts in the world economy over the last 30 years.  What are the implications of these shifts for international businesses based in Britain, North America, and Hong Kong?

Over the last 30 years, there has been a shift away from a world in which national economies are relatively self-contained entities, isolated by barriers to trade and investment, and differences in government regulation, culture, and business systems and toward a world where barriers to trade and investment are declining, cultures are converging, and national economies are merging into an integrated, interdependent global economic system.  As companies from Japan and emerging markets like China play a more vital role in the world economy, the dominance of companies from the United States and Western Europe has diminished.  Significant implications for British firms involve their need to look beyond Europe and America for investment and opportunities.  Consumer spending power is growing the most quickly in developing countries.  British firms also face the opportunity (and the threat) of attracting Asian firms interested in Britain as a launch pad for the European market.  For North American firms, the same holds true, although the importance of the increasing prosperity in Latin America suggests a potentially huge market in “their backyard.” Hong Kong, while losing its “independence”, is perceived as the gateway to the immense market of mainland China.  While the free market freedoms Hong Kong firms have enjoyed are now less taken for granted, access to China is improving along with the move towards a market economy within China.  International businesses based in all three locations are facing new opportunities and threats.

1.6)  If current trends continue,
China may emerge as the world’s largest economy by 2010.  Discuss the possible implications for such a development for a. the world trading system; b. the world monetary system; c. the business strategy of today’s European and US-based global corporations; and d. global commodity prices.

China is continuing to move toward greater free market reforms, and if it stays on its present track, could become an industrial superpower in the near future.  China, with its 1 billion people, is a largely untapped market for firms.  By some estimates, the Chinese economy could be larger than that of the United States on a purchasing power parity basis.  Already, annual foreign direct investment has jumped from less than $2 billion in 1983 to $70 billion in 2006.  China is also making waves in international markets as its firms like Hisense (see Management Focus: China’s Hisense—An Emerging Multinational) prove to be world class competitors. 

2.4)  The Nobel prize-winning economist Amartya Sen argues that the concept of development should be broadened to include more than just economic development. What other factors does Sen think should be included in an assessment of development? How might adoption of Sen’s views influence government policy? Do you think Sen is correct that development is about more than just economic development? Explain.

Sen argues that the ultimate goal of economic life is freedom.  Hence, development requires the removal of major impediments to freedom: poverty as well as tyranny, poor economic opportunities as well as systematic social deprivation, neglect of public facilities as well as the intolerance of repressive states. In Sen’s view, development is not only an economic process, but a political one too, and to succeed requires the democratization of political communities to give citizens a voice. Sen’s philosophy forces us to confront the fact that economic development is but one measure of a country’s overall development.  Governments that are influenced by Sen’s philosophy would value greater freedom for their citizens, usually by exchanging economic development in favor of greater individual freedom.  Sen is clearly right— a country that is economically prosperous while still limiting or imprisoning its citizens will ultimately wither because it will be stifling the individual entrepreneurship that leads to economic vitality.

2.5)  You are the CEO of a company that has to choose between making a $100 million investment in Russia or the Czech Republic. Both investments promise the same long-run return, so your choice is driven by risk considerations. Assess the various risks of doing business in each of these nations. Which investment would you favor and why?

When assessing the risks of investment, one should consider the political, economic, and legal risks of doing business in both Russia and the Czech Republic. The political risk in Russia is still high but it is undergoing continual governmental changes under Putin’s leadership, and courting foreign investment. Relatively, the Czech Republic is more stable, but it may have less potential.  On the economic front, both countries have inflation and high economic turmoil as unproductive factories are still struggling.  From the legal perspective, the Czech Republic is making clear progress, while the situation in Russia is unclear.  Thus at this time, the risk in Russia would clearly be higher. (For discussion or to modify this question, you might want to substitute other countries into this question depending on current events and the countries with which your students will be most familiar.)